Recent reforms to insolvency law

From September 1, 2023, a significant reform of insolvency law will come into effect in Belgium. This reform results from the transposition of a European directive aimed at harmonizing insolvency law at the European level. The reform has multiple objectives, including providing access to an effective restructuring system for companies in financial difficulties to prevent insolvency. It also aims to give individuals who have gone bankrupt a better chance at a fresh start and to improve the efficiency of restructuring and insolvency procedures, with the goal of shortening their duration.

The reform includes the following key changes:

  1. Preventive System: The reform offers comprehensive tools to prevent insolvency through an effective restructuring system. The role of the Chamber of Enterprises in Difficulty is expanded, enabling it to act as a mediator to reach agreements between debtors and creditors.
  2. Reform of the Judicial Reorganization Procedure: From September 1, 2023, the Judicial Reorganization Procedure undergoes significant changes, including judicial reorganization by amicable agreement and collective agreement. These changes aim for efficiency and are in line with European objectives.
  3. Transfer of Enterprises: The reform introduces new rules for the transfer of enterprises within the framework of judicial reorganization, legally regulating the fate of the enterprise after transfer.
  4. Liquidation/Dissolution over Bankruptcy: The reform encourages preference for liquidation or dissolution over time-consuming bankruptcy.
  5. Second Chance Policy: The reform puts a second chance policy at the forefront for natural persons declared bankrupt, where debts are automatically forgiven without application.

This reform marks a significant change in the Belgian insolvency landscape, aimed at efficiency and reconciliation between parties with diverging interests. Companies in difficulty and their advisors need to revise their approach to restructuring from September 1, 2023, both within the Judicial Reorganization Procedure and in the lead-up to bankruptcy when it is inevitable.

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